July 6, 2012

Amazon Smartphone Rumors Heating Up

When done right, smartphones can be big business. Apple, notorious for their profit margins, is able to earn quite a bit of money from their iPhones. As it turns out, ebooks and other forms of digital content are also big business.

Amazon has been able to do very well with their Kindle e-readers and have even taken a gamble by selling their 7-inch tablet at a loss in hopes to sell more ebooks, music and videos. Amazon´s Kindle Fire also puts the Amazon marketplace right at your fingertips, which is never a bad thing for driving business.

Now, a report from Bloomberg suggests Amazon wants to further their push into handheld electronics as well as Apple´s playground.

According to “unnamed sources,” Amazon is developing a smartphone which will be manufactured in a Foxconn factory (Apple´s backyard) and will run Google´s Android (Apple´s Nemesis).

As such, it´s likely Amazon is thinking ahead, as the unnamed sources have also said the Internet Retail Giant is working on acquiring some patents to defend itself against infringement allegations.

Of course, this isn´t the first time rumors of an Amazon-phone have surfaced. A report by All Things D last November claimed that Amazon could have a smartphone offering just in time for the holiday shopping season this year.

The November rumors cited Citigroup Analyst Mark Mahaney, saying the Amazon smartphone would likely sell at a slim, if not nonexistent, margin. According to Mahaney, an Amazon phone could set the Seattle company back by $150-$170 apiece.

“For a normal brand like HTC, they need to price the product at US $243 to make 30% gross margin,” Mahaney told AllThingsD. “If Amazon is actually willing to lose some money on the device, the price gap could be even bigger.”

Mahaney also said this branch-out into smartphone territory made sense, especially after they released the Fire.

Just like their 7-inch tablet, Amazon´s rumored smartphone will likely run a modified version of Google´s Android, which will have access to the Kindle App store.

Amazon isn´t going to take the current state of patent litigation lightly, it seems. The Bloomberg report says Amazon has hired Matt Gordon, the former senior director of acquisitions at Intellectual Ventures Management, LLC to act as General Manager for Patent Acquisitions. No stranger to these kinds of deals, Gordon´s previous employer owns more than 35,000 IP assets.

So far this year, Amazon has been involved in 5 patent related cases as well as 20 last year.

It´s not just analysts who think Amazon is ripe for the smartphone market, either. CNET´s executive Editor David Carnoy has argued before that such a smartphone is inevitable.

"I think it's only a matter of time before you see a Kindle smartphone; ultimately, Jeff Bezos knows that his company is going to have to compete directly against the iPhone if he wants Amazon to be Apple -- or even beat it," wrote Carnoy in an October piece.

So far, it seems the stock markets are happy with this news, as shares of Amazon stock have increased by .12% today.